Ahead of a three-day weekend filled with uncertainty, index technicals suffered more damage creating lower lows at price resistance and failing at or near their 200-day averages.  Rising inflation, indications of a slowing economy, a hawkish Fed, and geopolitical issues have created a perfect storm of uncertainty.  Markets hate uncertainty, and as we move toward a long weekend, it is understandable that the bulls face a difficult task in defending recent lows.  So expect another day of volatility.

Asian markets finished the week mixed with Hong Kong leading the selling down 1.88%.  However, this morning, European markets are trying to put on a brave face with modest gains as cautious traders weigh the Russia-Ukraine tensions.  Ahead of a light day of earnings and economic reports, the U.S. futures point to a modest recovery from yesterday’s selling with an uncertain 3-day weekend ahead.  

Economic Calendar

Earnings Calendar

As we wrap up the week, we have a light day on the earnings calendar with just 27 companies listed, several unconfirmed.  Notable reports include DKNG, ABR, B, BLMN, DE, & PPL.

News & Technicals’

The Ukrainian government and Russian state-controlled media exchanged fresh accusations of ceasefire violations near the country’s eastern border on Friday.  U.S. Secretary of State Antony Blinken warned at the U.N. Security Council meeting on Thursday that Russia plans to “manufacture a pretext for its attack” on Ukraine.  St. Louis Federal Reserve President James Bullard cautioned that inflation could become an even more severe problem without action on interest rates.  “We’re at more risk now than we’ve been in a generation that this could get out of control,” he said during a panel talk at Columbia University.  Bullard has called for a full percentage point in rate hikes by July.  Roku’s revenue growth slowed to a lower rate than analysts had expected.  However, the company said during the quarter that it would be able to keep YouTube and YouTube T.V. on its streaming service.  Finally, the Senate passed a short-term government spending bill, sending it to President Joe Biden’s desk and preventing a government shutdown.  The legislation will keep the government running through March 11.  Lawmakers hope to reach a long-term spending agreement during those three weeks.  Treasury Yields moved slightly lower in early Friday morning trading, with the 10-year dipping to 1.9685 and the 30-year falling to 2.2941%. 

It has been a rough week for the index technicals, new lower highs created at price resistance, and failures at or near 200-day moving averages.  Yesterday’s economic data continues to confirm a slowing economy as the Fed moves becomes more aggressive in fighting inflation.  A combination that could easily trigger a recession as we head toward spring and summer.  Add in the geopolitical tensions rising just before a 3-day weekend only intensifies market uncertainty.  With a light day on earnings and only the Existing Home Sales report to inspire the bulls or bears, I suspect the sensitivity to the Ukrainian border news cycle will play a substantial role as the long weekend approaches.  So plan your risk carefully because anything is possible.

Trade Wisely,

Doug